Can you imagine Pinterest or Instagram making money directly from selling consumer products instead of leasing its advertising platform? Like many of my fellow marketers out there, I would be highly skeptical about the business model. It hurts my brain to picture a social media provider trying to manage the supply chain and logistics.
However, one Chinese social media has done it and achieved enormous success. XiaoHongShu (The Red) is a mobile app that targets females who are interested in overseas cosmetics and fashion products. It’s proved that selling advertising space is not the only way a social media platform can generate mainstream income.
How it started?
With over 15 million users nationwide, XiaoHongShu started as a highly targeted social media platform where users share their reviews on overseas products within the cosmetics and fashion industry. As of June 2014, it experienced 20 million post likes and 1 million shares on a monthly basis. The niche markets are so addicted to the app that an average user spends over 130 minutes on it every day. It was ranked as the fourth most popular free app on Chinese iTunes store for quite some too.
The e-Commerce component was plugged in since the beginning of 2015. In its first three months, it had generated over $20 million in revenue. As I write this story, I’m still amazed by its unusual yet miraculous success. After some secondary research and an interview with one of their key business partners, here is my attempt at unlocking the success of XiaoHongShu.
"Give, Give, Give & Ask"
The first time I heard the ‘Give, give, give & ask’ Theory (or shall I call it a business mentality), was from Jack Delosa, a successful entrepreneur who founded The Entourage in Sydney. XiaoHongShu is the live textbook of the ‘Give, Give, Give & Ask’ Theory.
XiaoHongShu has provided the last two years as an ad-free and noise-free environment for users and asked nothing in return. When its own online store was launched within the app in the third year, the process went remarkably smoothly and was welcomed passionately by its social media users. It’s even reported that each new product released on XiaoHongShu’s online store is generally sold out within two hours!
Data-driven product offer with a focus on quality
XiaoHongShu’s online store does not have a wide selection of products. Every product is chosen carefully according to the top reviews and user popularity data generated from its social media platform (how handy!). Inventory is then purchased directly from overseas brand outlets.
As mentioned before, the loyalty of XiaoHongShu’s social media users was established via offering and enabling free and high quality product review content that reduces consumer perceived risks in purchasing overseas products. This understanding in consumer psychology also forms the backbone of XiaoHongShu’s online store. In order to ensure the high quality of products at an affordable price, XiaoHongShu bulk purchases the selected products directly from trustworthy suppliers based overseas.
Consumer insights driven promotions
Heavily relying on word-of-mouth, XiaoHongShu rarely does any promotional activities outside its own social media platform. It’s a bit like Facebook or Twitter – we rarely see these companies sell their ads on TV, print or any other Internet platforms. However, they all have their own innovative way of talking to the right audiences at the right place and right time. XiaoHongShu does so through creating "conversation triggers" among its users.
One successful promotion XiaoHongShu launched was the "Bachelor Delivery Man" campaign. Targeting its typical users - young females aged 20-35, XiaoHongShu hired a team of young and good-looking blokes to deliver goods to users. A tremendous amount of user generated content was created from the campaign. The team of Bachelor Delivery Men were mostly from foreign countries, to give the delivery of the contents and associated experience a touch of the ‘overseas’ feel which complimented with the products sold.
Overall, a social media platform does have the ability to act as an e-Commerce platform, and why shouldn’t it? It is after all, another online medium which has developed a network of users who have come together for a united purpose, in this case of XiaoHongShu, beauty and fashion products sourced from overseas companies and suppliers. Importantly, the social media channel is providing a service to connect users to products they clearly desire. They have been able to find a gap in the market and have used the Internet and the power of social media to make it happen. I don’t know about you, but it has certainly made me think if there are innovative ways we could be using the online platforms we are already familiar with.
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